Brent oil is currently trading around $71.9 per barrel. Citigroup predicts it could fall to $60–65 by year-end. If that happens — it's not just news for traders. It's news about the Kremlin's budget and whether Russia has enough money for war.
Why the Strait of Hormuz, not OPEC
The standard explanation for oil fluctuations is OPEC+ decisions. But this time Citigroup points to a different mechanism. The key factor is the normalization of shipping through the Strait of Hormuz following the escalation between the US and Iran in spring 2025.
"Fundamental factors are quickly coming to the forefront again. Shipping flows are normalizing, Chinese buyers remain passive, physical oil markets have weakened sharply, and inventories have declined much less than expected".
— Citigroup analytical note, according to Bloomberg
About 20% of the world's oil passes through the Strait of Hormuz. Geopolitical tensions in spring temporarily embedded an insurance premium in the price — and it's now disappearing faster than the market expected.
Goldman Sachs goes further
Citi is not the only bear in the market. Goldman Sachs predicts a global oil surplus of approximately 3 million barrels per day next year. According to Samantha Dart, co-head of Goldman's commodities research division, even inventory recovery after the Hormuz shock won't offset structural overproduction.
$60 is not a random figure for Russia
The $60 per barrel level is set as the ceiling of the price corridor under the G7 sanctions mechanism for Russian oil. This threshold was introduced to limit Kremlin revenues without cutting off supplies to the world market.
If Brent falls to $60, Russian Urals oil will end up even lower — it traditionally trades at a discount. According to NEST analytical center data, between May and December 2025, Russian budget oil revenues were already 35% lower year-over-year — in line with a 32% drop in the ruble price of export oil.
What "cheapening" means in practice
- For consumers: cheaper fuel in Europe and Asia — but not immediately and not proportionally.
- For Ukraine: reduction in oil revenues to Russia's budget theoretically constrains its ability to finance the war — although Moscow adapted its budget to lower prices back in 2022–2023.
- For sanctions architecture: if market price itself falls to the price corridor ceiling, the G7 mechanism effectively becomes irrelevant — and the question of its revision will arise again.
Citigroup directly recommends to "sell on any summer rally" and expects an American-Iranian deal to form over the coming months. If a memorandum between Washington and Tehran doesn't transform into a full agreement — the price insurance premium will return, and the $60 forecast will need to be rewritten.
